USA: surprisingly strong growth in the second quarter, although growth drivers are unsustainable. Europe: the economy remained more resilient than expected in the second quarter. China: exports have supported growth so far, but face challenges.
Chart of the month
The economic policy objective of Donald Trump’s election campaign is to strengthen the country’s industrial base with higher tariffs and a weak dollar. Trump’s trilemma, however, is that he can only pursue two of the three goals shown on the left at the same time. According to the textbook, higher tariffs lead to a stronger dollar. His targets would only be achievable if Trump could push the central bank into a low-interest-rate policy, which could lead to an unpopular surge in inflation. However, we do not believe that an attack on the independence of the US Federal Reserve would be successful. Overall, we therefore consider a USD depreciation policy to be unrealistic.
